Savings statute doesn’t bar re-filing of lawsuit

The Appeals Court has ruled that plaintiffs that voluntarily dismissed a suit in Delaware were not barred under the Massachusetts Savings Statute from re-filing in Superior Court.

The defendants argued that the action in Delaware did not toll the statute of limitations under G.L.c. 260, §32, because the law permits cases to be re-filed within one year only if they were involuntarily dismissed for a “matter of form.”

But in an issue of first impression, Judge Gabrielle R. Wolohojian said the court disagreed and concluded that voluntary dismissals are not per se excluded from the scope of the law.

“In sum, we see nothing in our case law to indicate that the savings statute applies only where the first action is involuntarily dismissed by a court,” the judge wrote. “Instead, our cases indicate that we are to look to the specific facts and circumstances surrounding the termination of the first suit to determine whether ‘the plaintiff has been defeated by some matter not affecting the merits, some defect or informality, which he can remedy or avoid by a new process.’”

Noemi A. Kawamoto, counsel to one of the defendants, said the Appeals Court decision reversed a ruling issued in January 2012 by Superior Court Judge Judith Fabricant.

Kawamoto said she and her client are contemplating what further action, if any, they will take.

“I don’t think the ruling is a great one because it doesn’t create a bright-line test, which is going to make it a lot more difficult for lawyers who are now going to have to look at the individual facts of every case,” said Kawamoto, who practices at Boston’s Yurko, Salvesen & Remz. “Because of that, this could be a good case for further appellate review, so that we can have the Supreme Judicial Court decide once and for all whether or not the savings statute applies to voluntary dismissals.”

Unless the ruling is reversed, lawyers will have to make a subjective fact-based analysis when deciding if a dismissal was for a matter of form, Kawamoto said.

“It’s going to make it a lot more difficult to get out of a case at a motion to dismiss stage,” she said. “Without a bright-line rule, it’s just so dependent on the facts.”

Kawamoto predicted that lawyers will look to enter into stipulations with opposing counsel about the precise reasons for a dismissal.

“If the grounds for a voluntary dismissal are agreed to, the other party won’t be able to later claim that they didn’t know why it was happening,” she said. “What a stipulation will do is prevent them from later trying to take advantage of the savings statute.”

John F. Hagan Jr. of the Illinois law firm Reed Smith represented the plaintiffs. Hagan did not return telephone calls seeking comment.

Allen N. David, who handled a 1st U.S. Circuit Court of Appeals case cited by Wolohojian, said there is no doubt that a dismissal for want of jurisdiction is a matter of form under the statute.

David, a Peabody & Arnold attorney who was not involved in Cannonball Fund, said the Appeals Court decision was diametrically opposed to the result reached by Fabricant.

“I thought Fabricant’s decision made sense and was the right one,” David said. “But the Appeals Court is saying that the statute is not express on whether there needs to be judicial involvement and is open to another interpretation. What they did was take up that invitation to take up that other interpretation.”

While some state statutes expressly indicate whether judicial involvement is required, the law in Massachusetts is vague, the Boston lawyer said.

“It’s certainly a plausible reading to say that such a requirement isn’t there, even though it’s not the one I would’ve expected,” David said. “I understand the policy rationale that it conserves judicial resources by not requiring someone to get a judge to act on it, although the way I read the statute seemed to imply that some action by a judge was needed.”

Case dismissed

Plaintiffs Cannonball Fund invested with defendant Dutchess Capital Management and several of its subsidiaries. The plaintiffs alleged that the defendants misrepresented their stated objectives and breached their fiduciary duties by making a series of questionable investments in two companies.

The plaintiffs claimed that, beginning in 2003, the defendants invested approximately $30 million in two companies for the purpose of enriching themselves through fees, stock grants and other compensation. The companies eventually failed.

The defendants notified the plaintiffs in a Feb. 27, 2008, letter that their redemption rights in the hedge fund had been frozen.

When the plaintiffs filed suit in Delaware in April 2010, some of the defendants moved to dismiss on jurisdictional grounds.

Following an October 2010 hearing on that question, the plaintiffs voluntarily dismissed the case without prejudice. They filed their 12-count complaint in the Business Litigation Session in June 2011, asserting similar claims to those in the Delaware action.

In dismissing the case, Fabricant said the only action taken by the judge in Delaware was to approve an unopposed motion for voluntary dismissal. Fabricant said the court’s action did not constitute a ruling on personal jurisdiction or any other ‘matter of form.’”

Court action alone

In reversing Fabricant, Wolohojian noted that Massachusetts has had a savings statute since the early 1770s. Its text has remained largely unmodified ever since, she wrote.

The judge said the statute is silent on the distinction between voluntary and involuntary dismissals.

“In this way, our statute stands in contrast to the savings statutes of other States,” she said, “some of which explicitly exclude voluntary dismissals and others of which explicitly include them.”

Wolohojian said the Appeals Court and SJC had never construed the statute as narrowly as the defendants had proposed.

“Court action alone does not seem dispositive to us in any event,” she said. “Otherwise, the fact that court approval was required to dismiss the Delaware action would alone suffice to defeat the defendants’ argument.”

The judge said the record did not establish that all the claims dismissed in Delaware were for a matter of form.

Those which were not were properly dismissed by Fabricant as untimely, she said. However, those claims for which a sufficient question of fact was raised in Superior Court as to whether they were voluntarily dismissed in Delaware because the plaintiffs had an objectively reasonable expectation that the claims would be involuntarily dismissed for lack of personal jurisdiction should not have been dismissed by Fabricant as untimely, she said.

“Our conclusion in this regard has the ancillary benefit of not creating a disincentive to plaintiffs who are frank and practical enough to acknowledge some defect of form in their suit and to voluntarily dismiss their claim as a result without further waste of scarce judicial resources,” Wolohojian said. “We see no reason to require further litigation simply to have the court dismiss involuntarily a claim the plaintiff is prepared to dismiss himself for the same defect of form.”